The U.S. dollar reduced its early loss as the U.S. trading session drew to a close on Monday, with investors focusing on this week’s Federal Reserve meeting—one of a number of key central-bank gatherings in coming days.
Earlier in the session, the dollar briefly slipped to session lows against havens like the Japanese yen and Swiss franc, following a failed terrorism attack near New York’s Times Square.
What are currencies doing?
The ICE Dollar Index DXY, -0.07% was little changed in positive territory at 93.939 after spending most of the session in the red. Just last week, the dollar index added 1.1% in its best weekly gain since the week ended Oct. 27.
The broader WSJ U.S. Dollar Index BUXX, -0.12% was also little changed at 87.30, as the new trading week got under way.
Read: Here’s what’s threatening the dollar in 2018
The greenback remained stronger against the Swiss franc USDCHF, -0.1613% but reversed its losses against the Japanese yen USDJPY, -0.12% Both currencies, widely viewed as havens, experienced an uptick against the greenback after the terrorism-related explosion in New York. One dollar last bought ¥113.52, little changed from ¥113.47 on Friday, as well as 0.9918 francs, down from 0.9927 francs late Friday.
The pound GBPUSD, +0.1499% bought $1.3338, down from $1.3384 late Friday in New York. Having started the session on an upbeat note and trading above the $1.34 mark, sterling pulled back before the beginning of the U.S. trading session.
The euro EURUSD, +0.1189% gave back its modest gains and changed hands at $1.1770, flat, compared with the prior session.
Looking at the Canadian unit, the greenback USDCAD, -0.1789% rose to C$1.2859 from C$1.2849 late Friday, with the U.S. currency on course for a fourth session of gains.
The New Zealand dollar USDNZD, -0.6185% soared more than 1%, pushing the kiwi to buy $0.6912, compared with $0.6835 in the prior session, after the Reserve Bank of New Zealand’s new head was named. The move marked a four-week high for kiwi.
Also read: Dollar weakness, China resilience, global growth will drive EM currencies in 2018
What’s driving the markets?
Investors have a busy week ahead for updates from central banks as 2017 draws to a close. The European Central Bank and the Bank of England are slated to release policy decisions on Thursday, and while no changes are expected, markets will look for commentary about the banks’s outlooks for stubbornly low inflation and the overall vigor of the global economy.
But a move is widely expected from the Federal Reserve on Wednesday. Traders are looking for the federal-funds interest rate to be raised by a quarter-percentage point, to 1.25%-1.5%. That would mark the third rate increase this year. Fed Chairwoman Janet Yellen, who will soon be leaving the central bank, will host her final post-decision news conference Wednesday.
Read: Here’s why the Fed will hike interest rates
New Zealand, meanwhile, will receive a new central bank chief in Adrian Orr, who was named on Monday to lead the Reserve Bank of New Zealand. The kiwi, as the New Zealand dollar is also called, jumped following the announcement. The 54-year-old will begin his five-year term as the bank’s governor on March 27.
“Excellent choice. A person considered to be an ‘internal’ candidate given his extensive RBNZ experience, but also has widespread “outside” experience including a decade as the CEO of the successful sovereign-wealth fund NZ Super Fund,” wrote Annette Beacher, chief Asia-Pacific macro strategist for FX and rates at TD Securities, in a note.
Even though Orr is a less well known central banker for the international FX community, the uncertainty premium over who will be at the head of the RBNZ has been reversed.
Read: Fed getting ready to hike as retail sales, but not inflation, picks up
What else are strategists saying?
“Given that the [Fed’s anticipated] hike is already over 98% priced in, it is highly unlikely to move the market when it happens. Instead, investors will be paying close attention to the pursuant statement, growth forecasts and press conference, in an attempt to gauge the continued path for rate hikes in 2018 and whether the path is being impacted by the lack of a resolution to the Fed’s inflation mystery,” Fiona Cincotta, senior market analyst at City Index, wrote in a note.
Even as the U.S. economy is close to full employment, “average hourly wage refuses to moves toward the 3%-4% [rate], which the Fed considers healthy, and inflation refuses to budge toward the Fed’s 2% target,” said Cincotta.
“Fed members are likely to incorporate fiscal stimulus effects in their forecasts, so small upward revisions to real GDP growth are likely,” said Natixis Americas chief economist Joseph LaVorgna. “Yet, the median of the dots should remain unchanged in 2018, consistent with three hikes, because core inflation will remain under 2% in the near-term.”
What economic data are in focus?
Job openings fell to 5.99 million in September, compared with 6.18 million in the previous month.